SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 12, 1999
_____________________
Exact Name of Registrant as
Specified in Its Charter: SMTEK INTERNATIONAL, INC.
___________________________________
DELAWARE 1-8101 33-0213512
_____________________________ ____________ _____________
State or Other Jurisdiction of Commission I.R.S. Employer
Incorporation or Organization File Number Identification No.
Address of Principal Executive Offices: 2151 Anchor Court
Thousand Oaks, CA 91320
_________________________
Registrant's Telephone Number, Including
Area Code: (805) 376-2595
_________________________
Former Name or Former Address,
if Changed Since Last Report: Not applicable
_________________________
Item 2. Acquisition or Disposition of Assets.
On November 12, 1999, SMTEK International, Inc. ("SMTEK" or the
"Company") sold 100% of the capital stock of its printed circuit board
operation, Irlandus Circuits Ltd. ("Irlandus"), which is located in Northern
Ireland. Irlandus was the sole operating unit which comprised SMTEK's
printed circuit board business segment. Accordingly, the sale of Irlandus
has been accounted for as the sale of a discontinued operation. The
purchaser was a management buy-out team which included one manager from
Irlandus and one manager from the Company's electronics manufacturing
services operation in Northern Ireland. The purchase price was negotiated
on an arms length basis between the Company and the purchaser. The sales
proceeds in the aggregate amount of 2,800,000 British pounds sterling
(approximately $4.5 million) consisted of a cash dividend of 500,000 pounds
sterling paid by Irlandus just prior to closing and cash of 2,300,000 pounds
sterling paid by the purchaser at closing.
In connection with the sale, SMTEK and the purchaser entered into a
purchase/supply agreement pursuant to which SMTEK agreed to purchase printed
circuit boards from Irlandus of at least 350,000 pounds sterling annually
(approximately $560,000) for the next three years. In addition, SMTEK and the
purchaser entered into a computer services agreement whereby SMTEK will provide
computer support services to Irlandus for a minimum term of one year for a flat
monthly fee of 1,500 pounds sterling (approximately $2,400) plus on-site
maintenance billed at 20 pounds sterling to 35 pounds sterling per hour.
In its press release dated November 19, 1999 which announced the sale
of Irlandus (attached as Exhibit 99.1 hereto), and in its Form 10-Q filed
with the Securities and Exchange Commission on November 22, 1999, the
Company stated that the gain on the sale was not material. The transaction
resulted in an increase in comprehensive income of approximately $94,000.
The components of such increase, as explained in more detail below, are a
loss from sale of discontinued operations of approximately $662,000 and
other comprehensive income of approximately $756,000.
At the time of sale, Irlandus had an accumulated foreign currency
translation loss of approximately $756,000. In accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation", this
amount has been included in the determination of the $662,000 loss on sale
of discontinued operations as shown in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999. In accordance with Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", an equal and
offsetting amount to the $756,000 foreign currency translation account
balance included in the loss on sale of discontinued operations is reported
as other comprehensive income in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999. Taking this offsetting amount into consideration,
the sale of Irlandus results in an increase in comprehensive income of
approximately $94,000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Pro forma financial information:
The unaudited pro forma condensed consolidated balance sheet of the
Company as of September 30, 1999, the unaudited pro forma condensed
consolidated statement of operations and other comprehensive income
(loss) for the year ended June 30, 1999, and the unaudited pro forma
condensed consolidated statement of operations for the three months
ended September 30, 1999 are attached hereto as pages F-1 through F-5.
(b) Exhibits
Exhibit Description
_______ ____________
10.1 Agreement dated November 12, 1999 between DDL Europe
Limited (a subsidiary of the Company) and Fast Track
Circuits Limited for the sale of the capital stock of
Irlandus Circuits Limited
99.1 Press release dated November 19, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMTEK INTERNATIONAL, INC.
December 28, 1999 /s/ Richard K. Vitelle
_________________________________ _________________________________
Date Richard K. Vitelle
Vice President -Finance
(Principal Financial Officer)
DESCRIPTION OF UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
REFLECTING THE SALE OF IRLANDUS CIRCUITS LTD.
BY SMTEK INTERNATIONAL, INC.
The following unaudited pro forma condensed consolidated financial
statements of SMTEK have been prepared giving effect to the sale of Irlandus
as if the transaction had taken place at September 30, 1999 for the pro
forma condensed consolidated balance sheet, and on July 1, 1998 in the case
of both the pro forma condensed consolidated statement of operations and
comprehensive income (loss) for the year ended June 30, 1999 and the pro
forma condensed consolidated statement of operations for the three months
ended September 30, 1999.
On November 12, 1999, SMTEK sold Irlandus for 2,800,000 British pounds
sterling (approximately $4,523,000), comprised of a cash dividend of 500,000
pounds sterling paid by Irlandus just prior to closing and cash of 2,300,000
pounds sterling paid by the purchaser at closing. SMTEK used a portion of
the sales proceeds to pay down its outstanding borrowings under its U.S.
bank line of credit in the amount of approximately $2,421,000.
Irlandus was the sole operating unit which comprised SMTEK's printed
circuit board business segment. Accordingly, Irlandus has been accounted
for as a discontinued operation.
Because the sale of Irlandus is assumed to occur on July 1, 1998, the
results of operations of Irlandus for fiscal 1999 are eliminated by a pro forma
adjustment in the accompanying pro forma condensed consolidated statement of
operations and comprehensive income (loss) for the year ended June 30, 1999.
At the time of sale, Irlandus had an accumulated foreign currency
translation loss of approximately $756,000. In accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation", this
amount has been included in the determination of the $662,000 loss on sale
of discontinued operations, as shown in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999. In accordance with Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", an equal and
offsetting amount to the $756,000 foreign currency translation account
balance included in the loss on sale of discontinued operations is reported
as other comprehensive income in the accompanying pro forma condensed
consolidated statement of operations and comprehensive income (loss) for the
year ended June 30, 1999.
The unaudited pro forma financial information is not necessarily
indicative of the results of operations or the financial position which
would have resulted had the sale of Irlandus actually been consummated at
any of the foregoing assumed dates, or which may result in the future. The
pro forma financial information should be read in conjunction with SMTEK's
historical financial statements.
F-1
SMTEK INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
(In thousands)
Historical Pro forma Pro forma
amounts adjustments amounts
------- --------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 4,049 $ (1,525)(A) $ 4,349
1,825 (B)
Accounts receivable, net 10,682 (1,868)(A) 8,814
Costs and estimated earnings
in excess of billings on
uncompleted contracts,
net of progress billings 6,958 6,958
Inventories 6,450 (644)(A) 5,806
Prepaid expenses 325 (62)(A) 263
------ ------ ------
Total current assets 28,464 (2,274) 26,190
Property and equipment, net 9,289 (3,447)(A) 5,842
Goodwill 2,104 2,104
Deposits and other assets 324 324
------ ------ ------
$ 40,181 $ (5,721) $ 34,460
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank lines of credit payable $ 4,861 $ (2,421)(B) $ 2,440
Current portion of long-term
debt 2,157 (478)(A) 1,679
Accounts payable 11,263 (1,331)(A) 9,932
Other current liabilities 4,936 (269)(A) 4,667
------ ------ ------
Total current liabilities 23,217 (4,499) 18,718
------ ------ ------
Long-term debt 7,234 (1,316)(A) 5,918
------ ------ ------
Stockholders' equity:
Common stock and additional
paid-in capital 36,971 36,971
Accumulated deficit (26,654) (662)(C) (27,316)
Accumulated other comprehensive
income (loss) (587) 756 (C) 169
------ ------ ------
Total stockholders' equity 9,730 94 9,824
------ ------ ------
$ 40,181 $ (5,721) $ 34,460
====== ====== ======
F-2
SMTEK INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
YEAR ENDED JUNE 30, 1999
(Unaudited)
(In thousands except per share amounts)
Historical Pro forma Pro forma
results adjustments results
------- --------- -------
Sales $59,492 $(8,317)(D) $51,175
------ ------ ------
Costs and expenses:
Cost of goods sold 51,523 (6,917)(D) 44,606
Administrative and selling 6,662 (1,109)(D) 5,553
Amortization of goodwill 1,284 1,284
------ ------ ------
59,469 (8,026) 51,443
------ ------ ------
Operating income (loss) 23 (291) (268)
------ ------ ------
Non-operating income (expense):
Interest expense (1,678) 14 (D) (1,458)
206 (E)
Other income (expense) 362 (241)(D) 121
------ ------ ------
(1,316) (21) (1,337)
------ ------ ------
Loss from continuing operations
before income taxes (1,293) (312) (1,605)
Provision for income taxes (1,202) (1,202)
------ ------ ------
Loss from continuing operations (2,495) (312) (2,807)
Loss from sale of discontinued
operations net of tax - (662)(C) (662)
------ ------ ------
Net loss (2,495) (974) (3,469)
------ ------ ------
Other comprehensive income (loss):
Foreign currency translation
adjustments (228) (228)
Reclassification of foreign currency
translation adjustments included in
loss from discontinued operations - 756(C) 756
------ ------ ------
Other comprehensive income (loss) (228) 756 528
------ ------ ------
Comprehensive loss $(2,723) $ (218) $(2,941)
====== ====== ======
Loss from continuing operations
per share $ (1.41) $ (1.58)
====== ======
Shares used in computing loss from
continuing operations per share 1,771 1,771
====== ======
F-3
SMTEK INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
(In thousands except per share amounts)
Historical Pro forma Pro forma
results adjustments results
------- --------- -------
Sales $ 15,211 $ 15,211
------ ------
Costs and expenses:
Cost of goods sold 13,378 13,378
Administrative and selling 1,350 1,350
Amortization of goodwill 326 326
------ ------
15,054 15,054
------ ------
Operating income 157 157
------ ------ ------
Non-operating income (expense):
Interest expense (252) 52 (E) (200)
Other income (expense) 37 37
------ ------ ------
(215) 52 (163)
------ ------ ------
Loss from continuing operations
before income taxes (58) 52 (6)
Provision for income taxes (20) (20)
------ ------ ------
Loss from continuing operations $ (78) $ 52 $ (26)
====== ====== ======
Loss from continuing operations
per share $(0.03) $(0.01)
====== ======
Shares used in computing loss from
continuing operations per share 2,267 2,267
====== ======
F-4
SMTEK INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(In thousands)
(A) To remove assets and liabilities of Irlandus Circuits.
(B) To record cash received on sale of Irlandus Circuits,
net of cash disbursed for transaction costs, as follows:
Sales proceeds paid by cash dividend from Irlandus $ 808
Sales proceeds paid in cash by purchaser 3,715
-------
Total sales proceeds 4,523
Cash paid for transaction costs (277)
-------
Net sales proceeds 4,246
Less cash disbursed to pay down borrowings
under U.S. bank line of credit (2,421)
-------
Net increase in cash $ 1,825
=======
(C) To record the loss on sale of Irlandus Circuits,
calculated as follows:
Net sales proceeds per (A) above $ 4,246
Assets of Irlandus Circuits $ 7,546
Liabilities of Irlandus Circuits (3,394)
-------
Net assets of divested operation 4,152 (4,152)
------- -------
Gain on sale before elimination of
currency translation account 94
Elimination of foreign currency translation account
balance of Irlandus Circuits (756)
-------
Loss on sale of Irlandus Circuits $ (662)
=======
(D) To eliminate the results of operations of Irlandus
Circuits for the year ended June 30, 1999.
Three Mos.
Year Ended Ended
6/30/99 9/30/99
------ -------
(E) To reduce interest expense to give effect to the
$2,421,000 paydown of bank lines of credit from
the proceeds of the Irlandus sale, with interest
calculated at an annual rate of 8.5% $ 206 $ 52
====== ======
F-5